Hourly pay rose by lowest level since 1982, said stats agency

(By Sandra Cordon)
(ANSA) - Rome, January 28 - Alarm bells sounded Tuesday over
the prospects for recovery by Italy's recession-ravaged economy
after the national statistics agency said that salary increases
last year rose by the smallest amount seen in over 30 years.

Hourly contract wages rose by just 1.4% - the lowest since
Istat began tracking these figures in 1982 - according to the
agency.

It noted that wage growth was still a bit stronger than
last year's average rate of inflation of 1.2%, suggesting that
real incomes edged up by 0.2% last year.

But together, the stats provide further evidence of how far
Italians have fallen in the double-dip recession that hit lows
in the past two years that have not been seen since the Second
World War.

That said, Istat also reported that consumer confidence in
Italy edged up slightly this month, reaching 98 points compared
with 96.4 in December 2013.

Consumer confidence has seesawed, yet consistently healthy
confidence is crucial to an economic recovery as people tend to
spend less when they feel pessimistic about the outlook and
particularly, their prospects for employment and job security.
The economic outlook received a boost last month when Istat
reported that gross domestic product (GDP) was flat in the third
quarter of last year after eight consecutive quarters of
negative growth and was forecast to return to positive growth in
the last three months of 2013.

But any confidence coming from that report was tempered by
subsequent forecasts that the expansion will continue to be very
weak.

In that vein, on Tuesday international ratings agency
Standard & Poor's (S&P) said that annual economic growth in
Italy will average only 0.5% between now and 2016.

That estimate was below the pace of GDP growth estimated by
the Bank of Italy, which says the economy will expand by 0.7%
this year, and other agencies, which have forecast a GDP
expansion in 2014 of 0.6%.

S&P said it was also keeping Italy's sovereign debt under
watch because of uncertainty over government policies and a debt
that is expected to rise to 134% of GDP by the year-end.

The agency, in a report on sovereign debt in European
economies, urged the Italian government to take further measures
to boost productivity, liberalize labour markets and increase
GDP growth.
It said it could revise its outlook for Italian debt "if
the government realized structural reforms in labor markets and
products and services ...(leading to) a higher level of growth
in the Italian economy".
Last week, the International Monetary Fund said that
although Italy looks to be emerging from its longest recession
in two years it expects the Italian economy to slowly recover,
with growth of 0.6% this year and 1.1% in 2015.

Evidence of a loss of confidence by business was also seen
Tuesday when the Italian government summoned Electrolux managers
for emergency talks after the electrical-appliance multinational
announced a shock wage-cut plan it said was necessary to keep
its Italian plants running.

Electrolux said it is proposing cutting wages in Italy by
three euros an hour, which it said was an 8% cut and would
amount to a reduction of less than 130 euros a month in workers'
net salaries.

The company said it had also proposed freezing salary
increases due to seniority and other rises linked to the
sector's national collective contract for three years in order
to "cool the inflation of labour costs, which is responsible for
the continuing growth in the competitive gap with the countries
of Eastern Europe".

Electrolux added that it was willing to consider "other
forms of reducing labour costs with lower or, if possible, no
consequences on salaries".
But with Italy's jobless rate hitting a record high of
12.7% in November, the latest available statistics, workers have
little bargaining power.

Youth unemployment in Italy reached almost 42%, part of a
problem reaching across the continent and leading the managing
director of the International Monetary Fund (IMF) Christine
Lagarde to sound the alarm on record unemployment levels in
Europe.

In a speech in New York, she noted that almost 20 million
people are jobless across Europe.

"We cannot say the crisis is over until its impact on the
labor market has not reversed," said Lagarde.
When unemployment is high, growth is slow because people
spend less and companies invest and hire less, Lagarde added,
stressing that the most effective way to boost employment is
through economic growth.